Question 1

The slope of the AE curve is 0.9. Investment decreases by $100 million and the price level is constant. Real GDP

Accepted Answer

A)  decreases by $10 million. 
B)  increases by $1 billion. 
C)  increases by $90 million. 
D)  decreases by $1 billion. 
A)  decreases by $10 million. 
B)  increases by $1 billion. 
C)  increases by $90 million. 
D)  decreases by $1 billion.

Question 2

The intertemporal substitution effect of a change in the price level results from a

Accepted Answer

A)  change in the price of foreign goods relative to domestic goods. 
B)  change in the purchasing power of wealth. 
C)  change in the price of current goods relative to future goods. 
D)  Both answers B and C are correct. 
A)  change in the price of foreign goods relative to domestic goods. 
B)  change in the purchasing power of wealth. 
C)  change in the price of current goods relative to future goods. 
D)  Both answers B and C are correct.

Question 3

Explain the relationships between real GDP, aggregate planned expenditure, induced expenditure, and unplanned investment.

Accepted Answer

All buyers in the economy make expenditu

Question 4

Consumption expenditures equal disposable income

Accepted Answer

A)  at every point on the saving function. 
B)  when saving equals disposable income. 
C)  at every point on the 45-degree line. 
D)  at every point on the consumption function. 
A)  at every point on the saving function. 
B)  when saving equals disposable income. 
C)  at every point on the 45-degree line. 
D)  at every point on the consumption function.

Question 5

Disposable income is

Accepted Answer

A)  income minus taxes plus transfer payments. 
B)  income plus transfer payments minus consumption expenditure. 
C)  total income divided by the price level. 
D)  income minus saving. 
A)  income minus taxes plus transfer payments. 
B)  income plus transfer payments minus consumption expenditure. 
C)  total income divided by the price level. 
D)  income minus saving.

Question 6

In a diagram with the consumption function, the shows all points where disposable income equals consumption expenditures.

Accepted Answer

A)  45-degree line 
B)  consumption function 
C)  aggregate demand curve 
D)  saving function 
A)  45-degree line 
B)  consumption function 
C)  aggregate demand curve 
D)  saving function

Question 7

-In the above figure, the marginal propensity to consume equals

Accepted Answer

A)  0.90. 
B)  0.75. 
C)  0.80. 
D)  0.85. 
A)  0.90. 
B)  0.75. 
C)  0.80. 
D)  0.85.

Question 8

Since 1970, U.S. consumption function has generally shifted _________because of_________ .

Accepted Answer

A)  upward; higher real interest rates 
B)  downward; higher real interest rates 
C)  upward; higher expected future income and rising wealth 
D)  downward; falling wealth 
A)  upward; higher real interest rates 
B)  downward; higher real interest rates 
C)  upward; higher expected future income and rising wealth 
D)  downward; falling wealth

Question 9

Actual aggregate expenditure does not always equal real GDP.

Accepted Answer

A) True 
 B)False

Question 10

Equilibrium real GDP is $400 billion, the MPC = 0.9, and there are no income taxes or imports. Investment increases $40 billion. If the price level is constant, after the increase in investment, equilibrium real GDP will be

Accepted Answer

A)  $800 billion. 
B)  $600 billion. 
C)  $360 billion. 
D)  $440 billion. 
A)  $800 billion. 
B)  $600 billion. 
C)  $360 billion. 
D)  $440 billion.

Question 11

An estimate of the MPC in the U.S. is 0.90.
Paul Krugman, the 2008 Nobel Prize winner in economics, stated, ʺ... youʹd be hard pressed to argue for an overall multiplier as high as 2.ʺ
What factors could explain the difference between the MPC and Krugmanʹs estimate of the multiplier?

Accepted Answer

A)  exports and investment. 
B)  imports and taxes. 
C)  investment and imports. 
D)  taxes and investment. 
A)  exports and investment. 
B)  imports and taxes. 
C)  investment and imports. 
D)  taxes and investment.

Question 12

An increase in_________ shifts the AE curve_________ and an increase in shifts the aggregate demand curve_________ .

Accepted Answer

A)  autonomous expenditure; upward; the price level; rightward 
B)  the price level; downward; autonomous expenditure; rightward 
C)  autonomous expenditure; upward; the price level; leftward 
D)  the price level; upward; autonomous expenditure; leftward 
A)  autonomous expenditure; upward; the price level; rightward 
B)  the price level; downward; autonomous expenditure; rightward 
C)  autonomous expenditure; upward; the price level; leftward 
D)  the price level; upward; autonomous expenditure; leftward

Question 13

Aggregate expenditure equals

Accepted Answer

A)  G + X - M. 
B)  C + I + G + X - M. 
C)  C + I + G + X. 
D)  C + I + G. 
A)  G + X - M. 
B)  C + I + G + X - M. 
C)  C + I + G + X. 
D)  C + I + G.

Question 14

-In the above figure the economy is initially at point A on aggregate expenditure curve AE0. Suppose firms expect profits to increase and decide to increase investment. As a result

Accepted Answer

A)  there is a movement along AE1 to a point such as C. 
B)  the AE curve shifts downward to a curve such as AE1. 
C)  the AE curve shifts upward to a curve such as AE2. 
D)  there is a movement along AE1 to a point such as B. 
A)  there is a movement along AE1 to a point such as C. 
B)  the AE curve shifts downward to a curve such as AE1. 
C)  the AE curve shifts upward to a curve such as AE2. 
D)  there is a movement along AE1 to a point such as B.

Question 15

If real GDP exceeds aggregate planned expenditure, what happens to firmʹs unplanned inventories?

Accepted Answer

If real GDP exceeds aggregate planned ex

Question 16

When real GDP exceeds aggregate planned expenditure,

Accepted Answer

A)  the circular flow will increase. 
B)  GDP will decrease. 
C)  actual inventories decrease below their target. 
D)  a higher level of equilibrium income will prevail. 
A)  the circular flow will increase. 
B)  GDP will decrease. 
C)  actual inventories decrease below their target. 
D)  a higher level of equilibrium income will prevail.

Question 17

-In the above figure, equilibrium expenditure is

Accepted Answer

A)  more than $12 trillion. 
B)  $12 trillion. 
C)  less than $12 trillion. 
D)  some amount that cannot be determined without more information. 
A)  more than $12 trillion. 
B)  $12 trillion. 
C)  less than $12 trillion. 
D)  some amount that cannot be determined without more information.

Question 18

The slope of the consumption function

Accepted Answer

A)  is undefined below the 45-degree line. 
B)  is negative. 
C)  equals the MPC. 
D)  is positive and equals 1 - MPC. 
A)  is undefined below the 45-degree line. 
B)  is negative. 
C)  equals the MPC. 
D)  is positive and equals 1 - MPC.

Question 19

-The equilibrium in the above figure is shown at point

Accepted Answer

A)  a. 
B)  b. 
C)  c. 
D)  d. 
A)  a. 
B)  b. 
C)  c. 
D)  d.

Question 20

$$\begin{array} { | l | l | } 
\hline \begin{array} { l } 
\text { Disposable income } \
\text { (dollars) }
\end{array} & \begin{array} { l } 
\text { Consumption } \
\text { expenditure (dollars) }
\end{array} \
\hline 0 & 100 \
\hline 100 & 180 \
\hline 300 & 340 \
\hline 500 & 500 \
\hline 700 & 660 \
\hline 900 & 820 \
\hline
\end{array}$$
-In the above table, savings are positive when disposable income is greater than

Accepted Answer

A)  $500. 
B)  zero. 
C)  $300. 
D)  $100. 
A)  $500. 
B)  zero. 
C)  $300. 
D)  $100.

The slope of the AE curve is 0.9. Investment decreases by $100 million and the price level is constant. Real GDP

The intertemporal substitution effect of a change in the price level results from a

Explain the relationships between real GDP, aggregate planned expenditure, induced expenditure, and unplanned investment.

Consumption expenditures equal disposable income

Disposable income is

In a diagram with the consumption function, the shows all points where disposable income equals consumption expenditures.

-In the above figure, the marginal propensity to consume equals

Since 1970, U.S. consumption function has generally shifted _because of_ .

Actual aggregate expenditure does not always equal real GDP.

Equilibrium real GDP is $400 billion, the MPC = 0.9, and there are no income taxes or imports. Investment increases $40 billion. If the price level is constant, after the increase in investment, equilibrium real GDP will be

An estimate of the MPC in the U.S. is 0.90. Paul Krugman, the 2008 Nobel Prize winner in economics, stated, ʺ... youʹd be hard pressed to argue for an overall multiplier as high as 2.ʺ What factors could explain the difference between the MPC and Krugmanʹs estimate of the multiplier?

An increase in_____ shifts the AE curve_ and an increase in shifts the aggregate demand curve_____ .

Aggregate expenditure equals

-In the above figure the economy is initially at point A on aggregate expenditure curve AE₀. Suppose firms expect profits to increase and decide to increase investment. As a result

If real GDP exceeds aggregate planned expenditure, what happens to firmʹs unplanned inventories?

When real GDP exceeds aggregate planned expenditure,

-In the above figure, equilibrium expenditure is

The slope of the consumption function

-The equilibrium in the above figure is shown at point

Disposable income (dollars) Consumption expenditure (dollars) 0 100 100 180 300 340 500 500 700 660 900 820 -In the above table, savings are positive when disposable income is greater than

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

U.S Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Review

Filters

Exam 11: Expenditure Multipliers: the Keynesian Model

The slope of the AE curve is 0.9. Investment decreases by $100 million and the price level is constant. Real GDP

The intertemporal substitution effect of a change in the price level results from a

Explain the relationships between real GDP, aggregate planned expenditure, induced expenditure, and unplanned investment.

Consumption expenditures equal disposable income

Disposable income is

In a diagram with the consumption function, the shows all points where disposable income equals consumption expenditures.

-In the above figure, the marginal propensity to consume equals

Since 1970, U.S. consumption function has generally shifted _________because of_________ .

Actual aggregate expenditure does not always equal real GDP.

Equilibrium real GDP is $400 billion, the MPC = 0.9, and there are no income taxes or imports. Investment increases $40 billion. If the price level is constant, after the increase in investment, equilibrium real GDP will be

An estimate of the MPC in the U.S. is 0.90. Paul Krugman, the 2008 Nobel Prize winner in economics, stated, ʺ... youʹd be hard pressed to argue for an overall multiplier as high as 2.ʺ What factors could explain the difference between the MPC and Krugmanʹs estimate of the multiplier?

An increase in_________ shifts the AE curve_________ and an increase in shifts the aggregate demand curve_________ .

Aggregate expenditure equals

-In the above figure the economy is initially at point A on aggregate expenditure curve AE0. Suppose firms expect profits to increase and decide to increase investment. As a result

If real GDP exceeds aggregate planned expenditure, what happens to firmʹs unplanned inventories?

When real GDP exceeds aggregate planned expenditure,

-In the above figure, equilibrium expenditure is

The slope of the consumption function

-The equilibrium in the above figure is shown at point

Disposable income (dollars) Consumption expenditure (dollars) 0 100 100 180 300 340 500 500 700 660 900 820 -In the above table, savings are positive when disposable income is greater than

What Is Economics

The Economic Problem

Demand and Supply

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

U.S Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Review

Filters

Since 1970, U.S. consumption function has generally shifted _because of_ .

An increase in_____ shifts the AE curve_ and an increase in shifts the aggregate demand curve_____ .

-In the above figure the economy is initially at point A on aggregate expenditure curve AE₀. Suppose firms expect profits to increase and decide to increase investment. As a result